Here’s What Could Drive Cleveland-Cliffs’ Q4 Volumes

Cleveland-Cliffs (CLF) reported volumes of 6.48 million long tons for its US Iron Ore division for the third quarter, which was at the upper end of the company’s guidance of 6.0 million–6.5 million tons. The volumes during the quarter reflected a YoY increase of 10.5%. Timothy Flanagan, CLF’s CFO, attributed the volume consistency to the persistent need for pellets from the Great Lakes blast furnaces.

During its second-quarter results, Cleveland-Cliffs had upgraded its 2018 US sales volume guidance from 20.5 million tons to 21.0 million tons on strong demand dynamics. This guidance implies growth of 12.5% YoY. During the third quarter, CLF reaffirmed this guidance. CLF’s production guidance remains at 20 million tons. Its sales volume includes part of the inventory the company built at the end of 2017.

This guidance at the mid-point implies sales volumes of 6.94 million tons for Q4 2018, implying 7% sequential growth and 29% growth YoY. The company expected this uptick in shipments in the fourth quarter, as mills were expected to stock up ahead of winter months.

Among Cliffs’ peers (DIA), AK Steel (AKS) missed its shipment guidance for the fourth quarter. US Steel’s (X) revenues fell short of analysts’ estimates. Steel Dynamics (STLD) also missed its top-line estimates. However, Nucor (NUE) managed to beat the top-line and bottom-line estimates.